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Press Releases

Exchange Fund Position at end-December 2015

The Hong Kong Monetary Authority (HKMA) today (Friday) published the unaudited financial position of the Exchange Fund at end-December 2015.

The Exchange Fund recorded an investment loss of HK$18.3 billion in 2015.  The main components were as follows:

  • losses on Hong Kong equities amounting to HK$5 billion;
  • gains on other equities amounting to HK$7.4 billion;
  • gains on bonds of HK$15.9 billion;
  • negative currency translation effect on non-Hong Kong dollar assets amounting to HK$44.9 billion (Note 1); and
  • gains on other investments amounting to HK$8.3 billion (Note 2).

 

Fees on placements by the Fiscal Reserves and placements by HKSAR Government funds and other statutory bodies were HK$46.7 billion and HK$14.7 billion respectively in 2015 (the rate of fee payment for 2015 is 5.5%).  After deducting the fees, interest and other expenses, the Accumulated Surplus (Note 3) of the Exchange Fund recorded a decrease of HK$90.3 billion (Annexes 1 & 2).

The Abridged Balance Sheet shows that the total assets of the Exchange Fund increased by HK$279.9 billion, from HK$3,149 billion at the end of 2014 to HK$3,428.9 billion at the end of 2015.  The increase was mainly attributable to an increase in the balance of the banking system and placements by the Fiscal Reserves.

The Exchange Fund recorded a negative investment return of 0.6% in 2015 (Note 4).  Specifically, the Investment Portfolio recorded a negative rate of return of 2% and the Backing Portfolio a positive rate of return of 0.3%.  The Long-Term Growth Portfolio recorded an annualised internal rate of return of about 12% since its inception.

Commenting on the performance of the Exchange Fund in 2015, Mr Norman Chan, Chief Executive of the HKMA, said, “Despite a negative return of 0.6%, the Exchange Fund’s loss is relatively mild comparing with major market indices.  With such adverse financial environment last year, many investment funds’ performance was disappointing and some even incurred losses of varying degrees.  Even the more conservative bond funds were no exception.  In fact, in anticipation of a worsening investment environment, we have already deployed a series of defensive moves over the past two years.  These include shortening the duration of our bond portfolios, increasing cash holdings, and reducing non-US dollar assets.  We have also quickened the pace of investment diversification, especially through investments under the Long-Term Growth Portfolio.  These moves have enhanced the resilience of the Exchange Fund and helped mitigate some potential losses.”

For the coming year, Mr Chan said, “Barely a few weeks into 2016, we have already observed further turbulence in the global financial markets, which once again underscored the imbalance and instability of the current global financial conditions.  We must therefore be prepared that the financial markets may continue to see wide fluctuations for some time.  Facing an even more complex and difficult investment environment, the HKMA will continue to manage the Exchange Fund prudently and make suitable defensive moves in response to market changes. I would like to reiterate that the statutory purposes and long-term investment strategy of the Exchange Fund call for a focus on the medium- and long-term performance of the Fund, instead of short-term fluctuations in the markets.”

 

Note 1:      This is primarily the effect of translating non-US dollar foreign currency assets into Hong Kong dollar after deducting the portion for currency hedging.

Note 2:      This is the valuation change of investments held by investment holding subsidiaries of the Exchange Fund.  These figures represent valuation changes up to the end of September 2015.  Valuations of these investments from October to December are not yet available.

Note 3:      This includes gains from the Strategic Portfolio but excludes gains from the investment holding subsidiaries.

Note 4:      This return excludes the performance of the Strategic Portfolio.

 

Annex 1:   Exchange Fund Results
Annex 2:   Exchange Fund Abridged Balance Sheet
Chart 1:    Investment Return of the Exchange Fund (1994 to 2015)

Powerpoint Presentation (PDF File, 581KB)
Remarks by Mr Norman T.L. Chan, Chief Executive of Hong Kong Monetary Authority (PDF File, 108KB)

 

Hong Kong Monetary Authority
22 January 2016

Last revision date: 22 January 2016
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